Budget Deficit Lower Than Forecasted

Governor of the Bank of Israel Prof. Amir Yaron. (Olivier Fitoussi/Flash90)

Israel’s state budget deficit in 2021 of NIS 68.7 billion, or 4.5% of GDP, was significantly lower than the 6.8% deficit that had been projected for 2021 and still better than the revised forecast of 5.5% two and a half months ago, the Ministry of Finance Accountant General reported on Monday.

The deficit was 11.7% in 2020; and 3.7% at the end of 2019, prior to the pandemic.

The improvement in 2021 was attributed to government revenues of NIS 413 billion, up 30% from 2020, and a fall in Covid-related expenditure by the government to NIS 55 billion, from NIS 68 billion in 2020.

Total tax revenues in 2021 amounted to NIS 384 billion with large rises in the collection of real estate taxes, capital gains, and income tax and VAT. Government expenditure fell in the second half of the year, after the government ended its unpaid leave program. The Israeli government had to pay NIS 41 billion last year just on interest on the national debt.

The omicron outbreak has not been reflected in the latest figures, but its effect is expected to show up in the January data.

Meanwhile, Bank of Israel Governor Amir Yaron told the Knesset Finance Committee on Monday that the current fifth coronavirus wave will cost Israel some NIS 2 billion ($640 million) every 20 days.

Yaron said that the estimate is based on decreased consumption and from employees quarantining or sick with the virus.

“Most estimates are of a relatively short wave — a number of weeks — that is why the cost to the economy per confirmed coronavirus case is not of macro-economic proportions. In such a scenario, pinpoint compensations focused on sectors that have been hurt should be continued,” Yaron added, according to a translation by Reuters.